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Debit or credit card for shopping: which is best?

debit cardHow do you shop? I’ve always assumed that most people, like me, would use their debit card to pay for everyday shopping. So I was intrigued to find out from Grandpa Minted that he puts everything on his credit card – and makes sure he pays off the balance in full at the end of the month.

Because I’m so paranoid about racking up interest, I rarely use my credit card. In a cash crisis, I’m more likely to go overdrawn than flex the plastic. If funds are thin on the ground, I can borrow from my emergency fund and pay it back when I can: a sort of DIY credit card.

I also wondered if Grandpa’s approach might be a generational thing. His age group had credit cards long before cash machines and debit cards were invented and perhaps he hadn’t moved on. However, hs argument was that you are far more protected using a credit card than a debit card, especially online. So I had a little dig around and discovered he has a fair point.

Credit cards are covered under the Consumer Credit Act (section 75 and 75a) for purchases over £100 up to £60,260. It means your card company may be liable to refund the cost of your purchase if something goes wrong ie you can’t get a refund for your faulty item/service because the supplier has gone bust. (This is particularly useful when airline and holiday companies go under.)

My skinted colleague Charlotte then reminded me that you don't have to have paid all of the (over £100) purchase price on the card for the protection to work. So, for example, you could buy something for £101, pay £10 on your credit card and the rest on your debit card. If the item or service fails, you are still covered for the full £101 even though you only paid £10 on your card.

What Grandpa didn’t mention was that, unlike most debit cards, you can usually clock up reward points or cash back for spending on the credit card. Amex Everyday and cards from retailers Amazon, John Lewis and Asda are the best for this, says Money saving Expert.

Meanwhile, using a credit card responsibly can help improve your credit score too – handy for larger loans such as mortgages. And, lastly, should a fraudster steal your credit card, they are a step away from your current account whereas a debit card feeds straight into it.

Against Grandpa’s mighty credit card, my poor little debit card is starting to look very insubstantial. But there is the one big plus that I will never forget or be unable to pay my balance off and end up saddled with lots of interest.

Nevertheless, the wisdom of seniors has made me reconsider. Especially for online purchases and air fares, I’m going to put that credit card to work.

See here for the SMM guide to credit cards

 

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Thursday, 16 August 2018